Now that we've got your attention, we have to confess: The
title of this story is a little misleading. You should never try to
beat The System.It will always win. If bureaucracy threatens to
bury you, remember: The System is all-powerful and all-knowing. You
can beat an egg, beat around the bush, or, at the risk of beating a
dead horse, you can be upbeat.But if you're thinking of beating
The System, think again--or at least think differently: "We
tell our clients how to manipulate the system," stresses Frank
Sweeney, "and to live as pleasantly as they can."

Sweeney would know. He spent a lifetime trying to beat The
System, beginning with a botched bank robbery at age 18. Even while
doing 23 years in federal prison, Sweeney was beating the system,
or cheating the system, by doing everything from pretending he was
Jewish to get the "sumptuous" Kosher meals to feigning
mental illness so he could be allowed a private cell. Now the
55-year-old runs Frank A. Sweeney & Associates and is legally
beating--er, manipulating--the system. His Tenafly, New Jersey,
firm advises federal prisoners on how to survive the Big House.

So what's the secret to being a good manipulator? Advises
Sweeney:"You need to think deviously, know the ropes and pull
the right ropes."

Which is why we salute these five entrepreneurs. They're
hardly in Sweeney's league, but we trust them with rope.

Geoff Williams, a part-time features reporter at The
Cincinnati Post, frequently freelances for a variety of national
publications. He says he's never really beaten The System, but
notes that he was beaten up in the third grade.

There's No Place Like A Home-Zoned Office

The problem: How do you run a homebased business and
still comply with those pesky zoning laws?

Reality check: While many regulations have been relaxed
in recent years, if you're mired in zoning dilemmas, it's
very difficult to get out of them, says Beverley Williams,
president and founder of the American Association of Home-Based
Businesses. And woe to those who live in Los Angeles, easily the
city with the worst of the home-business zoning laws, says
Williams."There aren't that many success stories,"
she says. "A lot of people don't beat the system.
It's so costly in time, money and emotion that a lot of people
simply move or go `underground' and hope nobody catches
them."

So we're celebrating any success story we can: Follow
the lead of Matt Miller, owner of Matt Miller Design, an
architectural firm founded in 1994. The 31-year-old and his
business are housed in an old home (built in 1859) in the South End
of Boston. "It's a very trendy neighborhood, full of brick
houses, pocket parks and gas lamps," he says.

Miller knew when he bought the house that he wanted to run his
business from it--and that's where the zoning issue became
tricky. It shouldn't have been, however. Over the years, the
house had been home to several businesses, including a hamburger
joint and a piano restoration company.

But--and hang on, because it's a convoluted ride--whereas
the zoning laws had the home listed as a single-family house, there
were two addresses listed for it: one for the residence and one for
the previous piano restoration business. "Which shows how the
records got screwed up," says Miller. But then, that's The
System for you.

For advice, Miller called Allen Lynch, an attorney at Peabody
& Brown in Boston. The two then conferred with the local zoning
enforcement office. Today, Miller continues with a residential use
permit and pays commercial taxes--thereby avoiding fees and
paperwork. The type of business he runs out of his home is legal
according to zoning laws.

Bottom-line advice: Get an attorney, suggests Miller. And
his attorney, Lynch, suggests, "If you need to do missionary
work with your neighbors, you should. Because these situations are
so low on the priority list, the zoning board doesn't go
knocking on doors, seeking to shut down businesses. You get into
trouble when the neighbors pick up the phone."

Don't Pay A Tax Until You See The Whites Of Their Eyes

The problem: How do you keep a little--no, make that a
lot--more of your money come tax time?

Reality check: Apparently that death and taxes thing is
still certain.

Done the Paula Jagemann way, taxes can almost be fun: On
the surface, Jagemann, 32, doesn't seem like a Tax Goddess--or
even like much of an entrepreneur: She still holds a job as
assistant to the CEO of Internet service provider UUNET
Technologies, and she's in her eighth year at Hood College in
Frederick, Maryland, securing her degree in economics--her
bachelor's degree. She's also a millionaire, worth
eight figures.

Jagemann saved herself several hundred thousand dollars in taxes
when she created Frederick, Maryland, OnlineOfficeSupplies.Com,
which has projected 1999 sales of $6 million. Jagemann started her
company last year with an initial investment of $500,000. Because
she didn't have the half million dollars in cash lying around,
she planned to take it from her sizable stock portfolio. But she
knew that by doing so, she'd lose perhaps $200,000 in taxes,
which would leave her with $300,000 to start her company. (Yeah, we
know: We should all have such problems.)

So instead of cashing out the $500,000, Jagemann transferred the
stock into her company, an idea she came up with from reading an
investment book years before. But wait--won't her company
eventually have to pay taxes on that half million when they sell
it? If they sell it, yes. But Jagemann points out that her
company can hold [the money] and use it as collateral to get loans.
If the stock performs well, it's a double benefit to the
company.

Bottom-line advice: "Pick up the phone,"
insists Jagemann. "I don't think you can read Taxes for
Dummies and become an expert. You've got to go to an expert
and check, just to be sure." Which she did, before
transferring her stock into her new company. Even Jagemann admits,
"I don't do my own taxes."

Leave Him A Loan

The problem: How do you get a hefty bank loan without
collateral?

Reality check: "Banks just aren't going to take
a risk," contends Sam Rubenstein, an attorney at Bryan Cave, a
Washington, DC, law firm."They'll eliminate the risk to
the furthest extent possible because that's what their business
is, to be risk-adverse."

What our stalwart hero did: Steve Giordano was shot at in
the jungles of Vietnam, so we assumed that asking for a hefty bank
loan--without collateral--was probably not all that frightening for
him. "That would be a true statement," concedes the
50-year-old Giordano, who tries not to sound incredulous when
presented with such a question. After his stint as an Army
lieutenant colonel, Giordano owned a technology company for many
years before starting a new one in 1996: Digital Now in Vienna,
Virginia. Digital Now integrates machines that transform everyday
photos into digital photos and creates software that allows
customers to make photo albums on their computers.

Although big-name clients signed on immediately, big money
didn't.Hewlett-Packard was distributing the software product
and would eventually send Giordano a cool $390,000. But the check
wouldn't be in the mail for another year, and Giordano needed
the money now.

He had already taken loans from banks, using the collateral his
business had, which wasn't much. "If you put up equipment
in a high-tech company, it depreciates so fast that nobody is going
to loan you money against it," Giordano says. "And there
was the [software] code we were writing, which is sort of
intangible."

Giordano's CPA, Larry Brown, found the bank they ultimately
pestered and prodded into lending them the $390,000 by networking
through a local business group. The bank's policy was to lend
80 percent of a company's accounts receivable. Unfortunately,
the Hewlett-Packard money wasn't officially considered that
yet. Giordano wasn't a good candidate for a loan.

But he persisted, and after about a dozen phone calls, the bank
agreed to lend Digital Now 60 percent of the money the company was
expecting from Hewlett-Packard, which translated to $234,000. Once
the Hewlett-Packard deal became an accounts receivable,
Giordano's loan was upped to the full 80 percent.

"We were mortgaging our future for current needs,"
Giordano admits. Fortunately, it worked. Digital Now's
projected sales for 1999 are expected to hit anywhere from $10
million to $12 million.

For the still-desperate: The SBA
(http://www.sba.org) is a good place to look for funds if
you're low on collateral. Jeffrey Letwin, an attorney in
Pittsburgh who specializes in bank loans, says that if you have a
substantial net worth and a long-term relationship with the
institution, you may be a candidate for a "character"
loan. And there are plenty of commercial finance companies that
will loan money for a larger take on the interest.

Bottom-line advice: "Be creative with the contracts
you have," says Giordano. "Even if they don't have a
good current value, if you sign a lot of long, strategic contracts,
banks may loan against that." What if you don't have
long-term contracts in the offering? Be nice to the person who has
the money. He or she just might bend the rules for you.

Here's To Your Health

Reality check: Overdosing on episodes of Chicago Hope and
ER in order to practice medicine on your employees is probably not
the way to go.

The way to go: In 1997, when John Campbell started his
Raleigh, North Carolina, firm, he picked up the cost of his
employees' old insurance carriers. Campbell, 33, paid through
COBRA, which squeezed the financial life out of him. Ironic,
because Campbell Alliance Group Inc., which projects sales of $3
million to $5 million this year, is a business development
consulting firm that serves healthcare information system vendors
and pharmaceutical companies. But not too ironic, Campbell asserts:
"Even large provider networks, health plans and hospitals
struggle with the cost of providing good care for their
employees."

Forget costly HMOs and PPOs, which Campbell considered briefly.
Instead, he formed an alliance with Adams Keegan, which isn't a
health-care provider at all but a professional employer
organization (PEO) in Memphis, Tennessee. Now this is an
industry that's a master at beating The System. The alliance
allowed Campbell to outsource his human resources functions to
Adams Keegan, effectively making the two companies
"co-employers." Because Adams Keegan handles human
resources for a network of companies, its buying power with
health-care providers allows it to find the best coverage at the
best price.

Campbell didn't let the co-employer term scare him--after
all, he's only sharing the part of his business he doesn't
want. Adams Keegan takes care of the health insurance headaches,
401K, workers' compensation insurance and other paper-heavy
tasks.

According to Bob Adams, president and CEO of Adams Keegan, PEOs
generally charge fees of 1 to
4 percent of a company's payroll. Even taking the cost of the
PEO into consideration, Campbell estimates he'll save $20,000 a
year in health insurance costs alone. "It lets me sleep a
little better at night," Campbell says. But if it didn't,
his health care would likely treat that, too.

What our mystery man did: No sane entrepreneur would
admit to breaking a contract. So we found a 38-year-old business
owner who agreed to share his insight, if we kept his name and $20
million international transportation firm incognito.

And Mr. X has broken, or revised, a few contracts in his
career.Recently, he signed a real estate-related contract with a
company (we'll call it Company Y), and all seemed well and
good. But then Company Y was purchased by--you know the
drill--Company Z. Company Z was a completely different
organization, and suddenly the contract was no longer a good deal
for Mr. X. Instead of breaking the contract outright, Mr. X
renegotiated--a process that took six months and two weeks--and
finally came to terms that Company Z could accept.

Recipe for success: Good communication in the foreground,
and an ominous-looking law firm in the background, will show your
nemesis you're serious. "That's the best one-two punch
you can have," says Mr. X, who adds that you should also
invite a third guest to the party: a neutral arbitrator. After six
months of bickering, Mr. X found a business associate who knew the
CEO of Company Z, and that arbitrator brought the two together for
discussions. A new contract was drawn up two weeks later."That
common link is important," stresses Mr. X. Without a mutually
respected arbitrator, you're just a name and phone number with
a checkbook.

Bottom-line advice: "Many entrepreneurs try to cut
costs by finding an inexpensive lawyer," says Mr. X.
"They don't realize that can be the most expensive mistake
they'll ever make." Mr. X uses a smaller-name law firm for
his routine tasks but finds more specialized attorneys for his more
complicated situations. "It's a lot like hiring an
employee. You have to ask yourself, `Am I hiring the person best
suited for this task?' "